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[The following information applies to the questions alsplayed below] Morning Sky, Incorporated (MSl), manufactures and sells computer games. The company has several product Ines based
[The following information applies to the questions alsplayed below] Morning Sky, Incorporated (MSl), manufactures and sells computer games. The company has several product Ines based on the age range of the target market. MSi sells both individual games as well as packaged sets. All games are in CD format, and some utilze accessorles such as steering wheels, electuonic tablets, and hand controls. To date, MSI has developed and manufactured all the CD s reelf as well as the accessories and packaging for all of its products. The gaming market has tradtsonally been targeted at teenogers and young adults; howewer, the increasing affordability of computers and the incorporation of computer activitles into Junlor hish and elementary school curriculums has led to a signiticant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The compary currently has excess capactiy and is Investigating several possible ways to improve profitiobility. MSI is considering eliminating a product from its Toddleiown Tours collection. This collection is alined at children one to three years i age and includes "tours" of a hypothescal town. Two products. The Pet Store Parade and Grocery Getawoy, have impressive sales. However, sales for the third CD in the collection, Post Office Polka (POP). have lagged the others. Several other CDs are planned for this collection, but none is ready for production. MSi's Information relsted to the ToddleTown Tours collection follows: "Allocated based on total sales revenue. MSI has determined that ellimination of the Post Oflice Poka (POP) program would not impact sales of the other two rems. The remaining ficed overhead currently allocated to the POP product would be redistributed to the remaining two products. Required: 1. Calculate the incremental effect on profit if the POP product is eliminated. 2 Should MSI drop the POP product? 3-a. Calculate the incremental effect on profit if the POP product is elliminated. Suppose that $1,000 of the common fixed costs could be avolded if the POP product line were eliminated. 3-b. Should MSI drop the POP product? Complete this question by entering your answers in the tabs below. Cakulate the incremental effect on profit if the POP product is eliminated. Should MSI drop the POP product? Should Misl drop the POP prodice? Calculate the incremental effect on profit if the POP product is eliminated. Suppose that $1,000 of the common fxed costs could be awoided if the POP product line were eliminated
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